Manufacturing sector of Pakistan accounts for 19.1 percent of
GDP and is the second largest sector of the economy. It grew by 8.4
percent during 2007 as against 10 percent last year. In the
manufacturing sector, large scale manufacturing (LSM), plays a vital
role and accounts for approximately 70 percent of overall manufacturing
[Economic Survey of Pakistan (2006-07)]. During 2006-07 relatively
slower pace of expansion exhibits signs of moderation on accounts of
higher capacity utilisation, difficulties in the textile sector and
lower than expected scale of operations of oil refineries. A number of
other factors have also contributed to the low pace of expansion in
manufacturing including zero percent growth in raw cotton production
which is a critical input for the textile industry, vegetable ghee and
cooking oil which comprise about 5.5 percent of the LSM sector, showed
uninspiring performance due to unparalleled rise in international palm
and soybean oil prices. The performance of the automobile sector has
been far less impressive this year as compared to previous five years
due to a fall in domestic demand for cars on account of increasing auto
financing rates. The higher imports of used cars in the beginning of
fiscal year 2006-07 also affected the performance of domestic auto
mobile sector.